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2006 UBS Study "Prices and Earnings"

Zurich / Basel Media Releases APAC

A global comparison of purchasing power in 71 cities around the world.

Four European cities and Tokyo most expensive - highest wages in Scandinavia, Switzerland and the US

  • Oslo, London, Copenhagen, Zurich and Tokyo are the world's most expensive cities.

  • With the highest net wages, Zurich and Geneva, followed by Dublin, Los Angeles and Luxembourg, lead the pack in purchasing power.

  • People in Asia work the longest hours - almost 50 days more per year than Western Europeans.

  • Asian workers at least partially compensate for low purchasing power through longer working hours.

Oslo, London, Copenhagen, Zurich and Tokyo are the world's most expensive cities in relation to a standardized basket of 122 goods and services. The UBS study "Prices and Earnings" shows that life is particularly expensive in London and New York if the cost of housing is included. The basket of goods and services costs the least in Kuala Lumpur, Mumbai, Delhi and Buenos Aires.

New York and Chicago drop back
Shifts in rankings are mostly the result of changes in foreign exchange rates. Compared to the 2003 edition of the UBS study"Prices and Earnings", New York and Chicago have dropped in the rankings, mostly due to the weaker dollar. Shanghai and Beijing, meanwhile, remain comparatively inexpensive despite an economic boom, because the national currency, the renminbi, has so far resisted pressures to appreciate.

Highest wages in Scandinavia, Switzerland and the US
In the cities of Western Europe and North America, workers in 14 representative professions earn a gross hourly wage averaging USD 18; in the Eastern European and Asian cities examined, the figure was only USD 4 to 5. The highest wages are paid in Copenhagen, Oslo, Zurich, Geneva, New York and London. In a comparison of net wages, the Scandinavian and German cities lose ground due to their high tax rates and social security payments. The shooting star in the international comparison of wages is English-speaking Europe, with Dublin and London new in the top ten.

35 minutes of work for a Big Mac
Wages only become meaningful in relation to prices, i.e., what can be bought with the money earned. A globally available product like a Big Mac can make the relationship between wages and prices much clearer. On a global average, 35 minutes of work buys a Big Mac. But the disparities are huge: In Nairobi, one and a half hours' work is needed to buy the burger with the average net hourly wage there. In the US cities of Los Angeles, New York, Chicago and Miami, a maximum of 13 minutes' labor is needed. Although the comprehensive comparison of purchasing power and gross wages puts them at the top of the table, higher production costs mean that workers in Swiss and Scandinavian cities need 15 to 20 minutes for their Big Macs. After buying the study's basic basket of goods and services, earners in Zurich, Geneva, Dublin, Los Angeles and Luxembourg retain the highest portion of their net wages for discretionary spending like vacations, luxury items or savings.

Seoul has the highest, Paris the lowest working hours
Asian employees can at least partially compensate for low hourly wages through longer hours spent at work. With a mean annual working time of 2088 hours, people work longest in the Asian cities. Based on a 42-hour work week, Asian workers labor about 50 days a year more than their peers in Paris, where a working year is just 1480 hours, or Berlin, where a years' work equals 1610 hours.

An analysis of the historical data produced by the UBS Study of Prices and Earnings, shows that Europeans have reduced their working hours in the last 30 years in favor of more leisure time. Americans and Asians, on the other hand, have a higher regard for earned income, it seems. Wage levels and leisure time determine prosperity - but more leisure time leads to greater prosperity only when wages reach an adequate level.

The Americas: New York the most expensive, highest purchasing power in Los Angeles
A dollar earned in Los Angeles, after deducting taxes and social security contributions, is worth more than in Chicago, New York, Miami, Toronto and Montreal. Although the highest wages are paid in New York, it also has the highest cost of living anywhere in the Americas. Thanks to their much higher wages, after buying the basic basket of goods and services, workers in North American cities have far more left over for vacations, luxury items or savings than their counterparts in Latin America. The average purchasing power in Central and South America is just a third of the level in the North American cities.

The biggest upward jumps compared to the previous issue of "Prices and Earnings" were recorded by São Paulo, Rio de Janeiro and Santiago de Chile. Economic growth and currency appreciation have reduced both the price and the wage gaps in relation to the North American cities. However, prices have risen more steeply than wages, so that the North-South divide in the distribution of purchasing power remains.

Asia Pacific: Large price and wage gaps
In no other region is the price spread between the most expensive and the cheapest city greater than in Asia. While Tokyo lands in fifth place among the world's most expensive cities, the region is also home to the cities at the other end of scale, including Delhi, Mumbai and Kuala Lumpur. Singapore and Taipei, as well as the two Pacific Rim cities Sydney and Auckland, occupy the midfield in the comparison of prices and wages. The highest wages in Asia are paid in Tokyo, although the Japanese capital has fallen seven places since UBS's last survey in 2003. The reasons for this are the devaluation of the yen against the euro and a deflationary price cycle that only ended recently. The highest level of purchasing power in Asia is enjoyed by workers in Tokyo, Taipei and Seoul. Sydney and Auckland have even made it into the top ten worldwide.

Europe: The internal market and the euro drive price convergence
Narrowing price differences for comparable goods and services are an important indicator of market integration. Based on historical price data, the newest UBS study of Prices and Earnings notes significant price convergence within the EU internal market. The creation of a common market and the launch of the euro as a common currency have contributed to reducing price differences. The mean relative price spread among the cities of the EU-15 in the survey has dropped by around a third since 1985. Having said that, the harmonization of price levels is not a linear process. Rather, it is subject to frequent bumps in the road to price parity. Market integration is furthest advanced in the Eurozone. The recent addition of ten new member states has again widened the spread of prices within the European Union.

Switzerland: No changes in high level of purchasing power
In the comparison of purchasing power, the Swiss cities of Zurich and Geneva remain at the top. Public sector wages largely support this result, since, in contrast to many emerging countries where teachers and bus drivers earn far less than comparable professions in the private sector, these jobs are comparatively well paid in Switzerland (and in Scandinavia). In terms of prices, too, the Swiss cities are at the fore. Food prices in particular confirm the country's image as a high-priced zone - only Tokyo is marginally pricier. Price differences between Geneva and Zurich are narrower for tradable goods than for services, which are some ten percent cheaper in Geneva.

The UBS studies "Prices and Earnings" can be downloaded under the following link:


The Americas
Andreas Hoefert,
Head Global Economic Research,
UBS Wealth Management Research

Tel. +1-212-713 3326

Asia Pacific
Yonghao Pu,
Head Wealth Management Research Asia Pacific,
UBS Wealth Management Research

Tel. +852-2971 8693

Europe and Switzerland
Simone Hofer,
Editor-in-Chief of "Prices and Earnings",
UBS Wealth Management Research

Tel. +41-44-234 4873

Daniel Kalt,
Head Economic & Swiss Research, UBS Wealth Management Research

Tel. +41-44-234 2560

The "Prices and Earnings" survey, issued by UBS every three years, presents a global overview of the prices of goods and services, wages, wage deductions and working hours, and the resulting purchasing power in 71 cities on all continents. Information is based on a survey comprising more than 35,000 individual data points. Based on historical data, the survey's analytical section examines long-term trends in price convergence in Europe and differing values attached to earned income versus leisure time, among other topics.

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